Our view: Tax policies at least need a review

Thursday

May 27, 2010 at 12:01 AMMay 27, 2010 at 7:21 AM

Economists with the University of Connecticut Center of Economic Analysis are suggesting the state use nearly $1 billion in unused research and development tax credits to stimulate Connecticut’s economy.

Economists with the University of Connecticut Center of Economic Analysis are suggesting the state use nearly $1 billion in unused research and development tax credits to stimulate Connecticut’s economy.

Large corporations that already have earned the credits are unable to capitalize on them because of the state’s poor economic climate. The credits must be used to offset tax liabilities, but these days there aren’t too many companies turning profits to create those tax liabilities.

According to the center’s report, loosening the ability of using those credits could add 40,000 new jobs, ultimately increasing state revenue from other taxes, such as income and sales taxes. The report estimated that could result in as much as $1.5 billion in new revenue annually — not bad for a state now facing a $3 billion to $4 billion shortfall in the coming years.

As the report notes, for a state that has done so poorly in creating new jobs, this proposal deserves serious consideration.

The report also notes that it cost far less to keep companies in the state than it does to try and entice new companies to locate here. Allowing more flexibility for companies that have already earned tax credits would seem to be a good step forward in retaining businesses that already are here.

Overhaul, not tweaks

Prior to the end of the legislative session earlier this month, we urged lawmakers to pass a bill that would have created an independent group to study the state’s taxing policy and make recommendations by the end of the year to the incoming governor and Legislature. The measure, however, was not acted upon.

We believe that such a step is warranted because no such review has been conducted since the state income tax was instituted in 1991. There have been plenty of changes to the state’s tax policy since, but no thorough review of what works and what doesn’t. The UConn study clearly suggests that some changes in the tax policy can be a beneficial.

That’s our opinion. We’d like to hear what you think. Send your comments to letters@norwichbulletin.com